LLB170 - Summary. Content of the parties bargain

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1 Content of the parties bargain LLB170 - Summary 1. Identifying express terms a. Incorporation of terms: i. By signature:! A party will be bound by all the terms set out in a contractual document if s/he has signed it, regardless of whether s/he read the document or not (L Estrange v Graucob)! Does not matter whether the terms are unusual or onerous (Toll v Alphaharm)! A party will not be bound if there has been fraud or misrepresentation (L Estrange v Graucob; Curtis v CC; Toll v Alphapharm)! Nor will they be bound if there has been duress, mistake (e.g. non est factum) or other vitiating elements or claims for statutory relief (Toll v Alphapharm)! Nor will they be bound if the document signed would not reasonably be understood to be contractual in character (Curtis v Chemical Cleaning; Rinaldi & Patroni) By notice:! P will be taken to have accepted terms displayed on a sign/notice/delivered on standard form/ticket/invoice/order form etc when:! P knew of the term(s) or was aware there were terms on the sign/ticket at the time the contract was formed (Thornton v Shoe Lane Parking); OR! Where D has done what was reasonable in the circumstances to give notice of the term to P (Thornton) " Timing: Notice must be given before the contract was formed (Olley v Marlborough Court; Thornton; Oceanic Sun Line) " Reasonable notice: Notice must be reasonable having regard to the type of contract, and nature of term (Thornton; Oceanic Sun Line v Fay; Baltic Shipping v Dillon)! A condition printed on a ticket is ineffective to alter a contract of carriage if the ticket is issued after the contract is made (Oceanic Sun Line)! In cases with automatic ticket dispensers, the contract is formed when the plaintiff inserts money into the machine and receives the ticket; conditions that are not made available till after this time are not binding as the contract has already been agreed upon. (Thornton v Shoe Lane)! In ticket cases, the passenger must have a reasonable opportunity to see and agree on any additional terms and conditions not initially made available when purchasing the ticket, in order for them to form part of the contract. The question to be asked is: what more could the carrier have done to give reasonable notice of the conditions? (Baltic Shipping) By course of dealing:! By continuing to deal with the party seeking to impose the term, the other party may be taken to have evinced acceptance of and readiness to be bound by the term (Hardwick Game Farm v Lilico)! When parties have a history of regular and uniform dealings, the party to be bound evidences an understanding of the terms and a willingness to be bound by continuing to deal with the imposing party (Balmain New Ferry)! Test: whether the other party knew or ought reasonably to have known from their previous course of dealings that the other party only contracted on the basis of a particular term (Balmain New Ferry v Robertson)! Course of dealing needs to be regular (Henry Kendall) and uniform (McCutcheon v MacBrayne)! Document containing the term sought to be incorporated must have been reasonably considered or treated by the parties as a contractual document and not as a mere receipt (Hill v Wright; Rinaldi & Patroni v Precision Mouldings) b. Statements made by parties during the course of negotiation - Is it a term? A representation inducing the contract? Or mere puff? i. Is it a term? Two steps:! 1. Is the evidence admissible? Yes if contract is oral or part oral/part written. If written barred by the Parol evidence rule> (Parol evidence rule excludes the admission of extrinsic evidence to subtract from, add to, vary or contradict the terms or to explain the meaning of the terms.)! 2. Is the pre-contractual statement promissory?

2 " Or just mere puff? (Carlill) " A representation a non-promissory statement inducing party to enter contract? (JJ Savage; Oscar Chess) " A term a promissory statement with contractual force? (JJ Savage; Banque Brussels; Dick Bentley; Oscar Chess)! Parol evidence rule excludes: " Extrinsic evidence of prior negotiations (verbal/written exchanges) " Extrinsic evidence of the parties actual subjective intentions " Extrinsic evidence of subsequent conduct of parties! Traditional (strict) approach: where the document appears on its face to be a complete record it will be taken to be a contract in writing and the parol evidence rule applies (Thorne v Borthwick)! Lenient approach: parol evidence rule has no operation until it is first determined that the terms of the agreement are wholly in writing. Extrinsic evidence is admissible to determine this issue (SRA v Heath Outdoors; Masterton Homes v Palm Assets) Ways around the parol evidence rule:! Prove contract is part oral/part written: " SRA v Heath Outdoors: The parole evidence rule only applies to contracts found to be wholly in writing. Extrinsic evidence is admissible in order to ascertain whether a contractual document does in fact include all the terms of the contract, or whether it is partly oral and partly written. " Masterton Homes v Palm Assets! Prove a collateral contract: " One party makes a promise connected to but independent of main contract in exchange for which other party enters main contract. " Requirements: Must be promissory and intended to induce entry into the contract (JJ Savage) Cannot contradict or be inconsistent with the terms on the main contract (Hoyts v Spencer) Entry into main contract must be given in response to and exchange for the collateral promise (Australian Woollen Mills) " Court may be more willing to find a collateral contract where the subject matter of the promise is not something that would naturally find its place in the main contract (Shepperd v Ryde Council)! Estoppel: " Differing authorities as to whether extrinsic evidence is admissible for purpose of establishing an estoppel arising as a result of a pre-contractual representation: " Saleh v Romanous: A promissory estoppel is an equitable restraint, not seeking a contractual right, thus being immune to the parol evidence rule. " Australian Co-operative Foods v Norco c. Is the statement a term of the contract? i. Distinguish from something less (mere puff or representation):! Look for an intention attributed to the maker of the statement to make a binding promise, to guarantee or arrant the truth of the statement (Oscar Chess)! Statement must be promissory and not merely representational expressed as an assurance, guarantee, promise (JJ Savage)! The true question was whether the statement was promissory in character Banque Brussels v ANI) Objective test: Intelligent bystander! Ascertained objectively from the totality of the evidence (Oscar Chess)! Depends on the conduct of the parties, their words and behaviour rather than thoughts. If an intelligent bystander would reasonable infer a warranty was intended that will suffice (Oscar Chess)! Intelligent bystander might have regard to: " Whether the parties recorded their agreement in writing (Equuscorp) Where parties have recorded their agreement in a formal written contractual document, this will often suggest that any statements made by the parties during negotiations, and not included in the written contract, were not intended to be part of the final contract " Precise language used by the parties (JJ Savage)

3 A statement is more likely to be considered promissory where the party making it uses words that suggest a promise. Estimated speed is more an expression of opinion. " Relative knowledge or expertise of the parties (Oscar Chess; Dick Bentley; Smythe v Thomas) A statement made by a party with expertise to a person who is inexperienced is more likely to be promissory than a statement made by a party known to be inexperienced (Oscar Chess; Dick Bentley) " Importance of statements to the transaction assessed objectively (Oscar Chess; Hospital Products; Smythe) " Time elapsed between making statement and entry into contract (Oscar Chess; Hospital Products) 2. Interpreting the terms a. Admissible evidence i. If the contract is oral?! Evidence of the negotiations for the contract, the context in which the contract was made, nature of the industry in which the parties are operating, etc. If the contract is in writing?! Parole evidence rule applies.! Meaning of terms determined from the words of the contract itself, in the context of the contract as a whole! Evidence of surrounding circumstances " Australian position Codelfa Construction v SRA such evidence admitted only where language of contract is ambiguous or susceptible of more than one meaning. " Look to the objective framework of facts within which the contract came into existence, and to the parties presumed intentions within that setting (Codelfa) " Objective framework includes: Factual background known to both parties before or at the date of contract inc. pre-contractual negotiations to extent they show background facts known to both parties (Codelfa) Evidence of genesis/aim/commercial purpose of transaction to extent it is objectively ascertained (Codelfa; Pacific v BNP Paribas) E.g. in Royal Botanic Gardens v SSCC: may have regard to additional costs and expenses which [lessor] may incur in regard to the surface of the Domain and which arise out of the construction, operation and maintenance of the parking station b. Construing (giving meaning) to the terms i. The court aims to give effect to the intentions of the parties! Determined objectively not interested in private intentions (Pacific Carriers)! Presumed intention: " the construction of a contract is an objective question for the court and the subjective beliefs of the parties are generally irrelevant (Brambles v Bathurst CC) " what a reasonable person would understand by the language in which the parties have expressed their agreement (Toll v Alphapharm)! Objective test: " What would a reasonable person in the position of the parties understand by the terms? (Pacific Carriers v BNP Paribas) 1. Look to the natural and ordinary meaning of the words the parties have used Considered in the light of the contract as a whole, giving due weight to the context in which the words appear And in oral/part oral contracts or where there is ambiguity in wholly written contracts have regard to the surrounding circumstances known to both parties and the purpose and objects of the transaction! ABC v APRA if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, even though the construction adopted is not the most obvious, or the most grammatically accurate Construing exclusion clauses

4 ! First, consider if there are legislative restrictions (e.g. s 64 ACL)! Apply 2 step common law approach: " Is the clause a term of the contract? " As a matter of construction, does the exclusion clause exclude or limit the liability that has arisen?! 3 questions to ask in determining whether an exclusion clause applies to reduce or exclude a party s liability: " Whether or not the exclusion clause was properly incorporated into the contract " Whether the person seeking to rely on the protection of the clause was a party to the contract " Determine whether, as a matter of construction, the clause applies to exclude or reduce the liability in relation to the issue in dispute.! Depends on intention of the parties as expressed in their contract! Onus of proof in showing exclusion clause excludes/limits liability is on the party seeking to rely on it.! Rule in Darlington v Delco Construe according to natural and ordinary meaning, read in light of the contract as a whole, thereby giving due weight to the context in which the clause appears but where there is ambiguity, clause is construed contra preferentem (adopting the construction least favourable to the party seeking to rely upon it)! Secondary rules of construction: " Four corners rule: may apply where loss caused by performance of acts not authorised by contract i.e. clause unlikely to apply to acts outside the four corners of the contract (Council of Sydney CC v West) " Deviation rule: may apply where loss caused during or following deviation from agreed/customary route in a contract of carriage i.e. clause will not cover loss occurring during deviation from a contractually agreed route. Route may be expressly stipulated or by implication as customary usual route. (TNT v May & Baker) " Excluding liability for negligence rule: Clear words are necessary to exclude liability for negligence (Davis v Pearce Parking Station) i.e. if it is not explicitly stated in the contract, not likely to be covered. Look at whether the clause is sufficiently clearly worded to protect from liability for negligence (Davis v Pearce) A clause expressed in general but expansive language, e.g. excluding liability for losses howsoever caused or stating that under no circumstances will the party in question be liable, may also be sufficient to exclude negligence. Look at whether the party could actually be liable for loss and damage occurring in the absence of negligence. (Davis v Pearce) " Excluding liability for malicious acts/deliberate breach: Courts tend to require clear words before an exclusion clause will be construed as excluding liability for a deliberate breach of contract (Davis v Pearce) " However, a strongly worded clause may also have this effect (Photo Production v Securicor Transport) Gap-Filling 1. Implied Terms a. Implied in Fact ad hoc terms implied at common law into a particular contract. Courts slow to imply terms into fact in formal (written) contracts stringent requirements. Test may not be so strict in cases where there is no formal contract. i. BP Refinery tests! Reasonable & equitable: A term that, although beneficial to one party, imposes a significant detriment or burden on the other party, is unlikely to be reasonable and equitable! Necessary to give business efficacy: Whether or not reasonable persons would consider that the proposed term was necessarily to enable the contract to operate in a businesslike manner (The Moorcock). No term will be implied if the contract is effective without it.! So obvious that it goes without saying: Must be so obvious... (that) an officious bystander were to suggest some provision for it in their agreement, they would

5 testily suppress him with a common Oh, of course!. (Shirlaw v Southern Foundries)! Capable of clear expression: Less possible it is to clearly and precisely state the term, less wiling court appears to be to infer that such a term would coincide with intention of the parties.! Not contradict the express terms of the contract: Needs to be harmonious with express terms. A clause stating writing = whole of contract may not be fatal (Hart v McDonald) UK Position Attonery General of Belize v Belize Telecom! Formal tests in BP Refinery should not be regarded as a series of independent tests to be surmounted.! There is one question: what the instrument, read as a whole against the relevant background, would reasonable be understood to mean. i Informal contracts flexible approach! Hawkins v Clayton: the court should imply a term by reference to the imputed intention of the parties if it can be seen that the implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case.! Byrne v Australian Airlines Ltd obviousness remains an important element in implying a term in an informal contract.! Requirements: Can imply a term in fact into an informal contract where the term is: " Necessary for the reasonable or effective operation of the contract (Byrne) " Query need to also show the term is so obvious it goes without saying (Byrne) b. Implied in Law standard terms implied at common law into all contracts of a particular class/type i. Questions to ask:! Is this the type/category of contract in which a particular standard term is always implied?! Has the term been excluded by the parties in their contract?! Byrne v Australian Airlines became so much a part of the common understandings as to be imported into all transactions of the particular description. Examples include: " Implied conditions of reasonable fitness and merchantable quality on a contract for the sale of goods " Rule that payment and delivery of goods are concurrent conditions " Implied warranty of seaworthiness " Implied condition on the letting of a furnished house that it is reasonably fit for habitation " Implied promise by one who agrees to build a house that the house will be reasonably fit for habitation " Implied promise by a servant not to disclose secret processes, not to hand over to a rival written work completed for the master, and not, while still in his master s employment, to solicit the master s customers to transfer their custom to himself " Implied promise by an employer (in some cases) to furnish work " Implied duty of care in the carriage of passengers and in looking after bailed goods. " Implied promise by a banker not to disclose the state of his customers account Implying a term in law for the first time:! Term must be applicable to a definable class of contractual relationship! Term must be suitable for it to be recognised as implied in all contracts of that class! Test of necessity Byrne v Australian Airlines: " that unless such a term be implied, the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined.

6 ! University of Western Australia v Gray: " More general considerations " Include the inherent nature of the contract and of the relationship thereby established. " Might also include issues of justice and policy and of social consequences! Liverpool CC v Irwin: " Such an obligation should only be read into the contract as the nature of the contract implicitly requires a test of necessity c. Implied by Custom of Usage standard terms implied at common law into a class/type of contract by reference to customs prevailing in a trade or locality i. Requirements Con-Stan Industries v Norwich! Term must be notorious in the trade or industry or locality! Where a custom is well known and acquiesced in, then everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract! Cannot be contract to express terms of the agreement! Person may be bound by a custom notwithstanding the fact they had no knowledge of it

LAWS 1072: CONTRACTS

LAWS1072- CONTRACTS 2- EXAM NOTES: LAWS 1072: CONTRACTS 2 Semester 2 2010 1 LAWS1072- CONTRACTS 2- EXAM NOTES: 2 LAWS1072- CONTRACTS 2- EXAM NOTES: CONSTRUCTION: 1. Express terms: a. Statements made during